YTL Power International (YTLPOWR)’s share price has more than doubled YTD thanks to a 9x YoY jump in its 9MFY23 core profit to RM955.4m. The current full-year FY23 consensus net profit estimate of RM1.26b implies a 4QFY23F net profit of RM300m.
“We expect YTLPOWR’s 4QFY23 net profit to beat the number handsomely as the Uniform Singapore Energy Price (USEP) jumped 43% to SGD373.7/MWh on average in 2QCY23 from SGD260.7/MWh in 1QCY23,” said Kenanga Research (Kenanga) in the recent Results Preview.
As such, PowerSeraya is likely to report strong QoQ earnings in 4QFY23. Recall that YTLPOWR reported a pre-tax profit of RM806.4m for its power generation segment in 3QFY23.
Wessex Water is expected to turn profitable in 4QFY23 from pre-tax losses of RM16.1m and RM47.2m in 2QFY23 and 3QFY23 respectively after an average 9% tariff hike from 1 April 2023, which should be sufficient to offset the rising operating costs.
“The tariff hike was to adjust for UK Nov 2022 consumer price index. We expect 4QFY23 net profit to rise 10%−12% QoQ to RM585m−RM590m as we expect a higher pre-tax profit of RM830m for the power generation unit with Wessex Water turning profitable at RM140m,” said Kenanga.
According to the research house, PowerSeraya’s earning is expected to normalise from the exceptionally high electricity price in
2HFY23.
However, the retail price is unlikely to fall to pre-Covid levels of below SGD100/MWh in the immediate term as there are no new plants powering up in Singapore for the next three years.
Kenanga continues to like YTLPOWR for its improved earnings prospects with the turnaround of PowerSeraya, the revised new tariff rate from Apr 2023 keeping Wessex Water’s earnings resilient, and huge earnings potential from the new data centre venture.
The research house states a Target Price of RM1.85 and maintains the Outperform rating. Risks to Kenanga’s recommendation include stringent ESG standards in developed markets, regulatory risk in the power sector in Singapore, the new data centre business fails to take off, and sustained losses at Yes.
